Some declines in the money supply and the price level

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Consider the application of the IS/LM model to the Great Depression. In 2002, Ben Bernanke was speaking for the entire Federal Reserve Bank and admitted to mistakes in the policy response to the economic downturn in the 1930s. Recall that the data shows strong declines in output and the interest rate and some declines in the money supply and the price level.

Between the 'Spending' and the 'Money' Hypothesis, which one is more likely to have contributed to the downturn in a major way according to our discussion and why? Draw a graph as part of your answer and explain in detail the reason for any shifts you depict.

Reference no: EM131170646

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